Gintis Smashing Heterodox Economics

Remember the “post-autistic” movement in economics that began in France in 2000? Have you, too, been irritated by the sometimes, ehmm, bizarre claims that are put forward by members of the “post-autistic economics network“? Do you think utterances such as the following one are, to put it nicely, not accurate representations of modern economic theory:

Game theory cannot be “applied”: it only tells little “stories” about the possible consequences of rational individuals’ choices made once and for all and simultaneously by all of them. . . . Akerlof, Spence and Stiglitz have no new “findings”, they just present, in a mathematical form, some very old ideas — long known by insurance companies and by those who organize auctions and second hand markets. . . . Amartya Sen, as an economist, is a standard microeconomist (that is what he was awarded the Nobel Prize for): only the vocabulary is different (“capabilities”, “functionings”, etc.).

… the authors seem completely unaware of contemporary economic theoretical research, which addresses many of the serious problems with neoclassical theory. There is a short piece on behavioral economics, which has been one of the most vibrant areas in economics over the past 25 years, but the author assumes that behavioral economics is an alternative to neoclassical economics. Rather, it is a complement to economic theory and a source of empirical data that can be used to generate better models. Behavioral economics uses decision theory and game theory to critique the Homo economicus of traditional economic theory, but the profession is responding by revising Homo economicus, not by rejecting behavioral economics (see recent papers in Econometrica, the Quarterly Journal of Economics, and other journals).

Post-autistic economics ignores the innovative work of Ernst Fehr, Abijit Banerjee and Esther Duflo, Colin Camerer, Samuel Bowles, George Loewenstein, Daniel Kahneman, Benoit Mandelbrot, Edward Glaeser, David Laibson, Matthew Rabin, Bruno Frey, Elinor Ostrom, Armin Falk, Simon Gaechter, Jean Tirole, Aldo Rustichini, and many others. It ignores neuroeconomics, econophysics, and the notion of the economy as a complex system, with its stress on agent-based modeling. These researchers transform analytical economics to meet the empirical challenges posed by new data. Unlike leaders of the post-autistic school, they do not urge a retreat to philosophy or some defunct 20th century doctrine.

Although I largely agree with Gintis, parts of what he says may be over the top, and he seems to neglect that it may be possible simultaneously to endorse elements of heterodoxy and mainstream economics. I (like co-blogger Peter) have leanings towards Austrian economics and I like mainstream economics. Austrian economics is not simply verbal mainstream economics, but there is very substantial overlap.

Still, as Gintis points out, a main problem with heterodoxy is the too often uninformed opposition to mainstream economics. Why don’t heterodox economists themselves adopt the tolerant attitude (towards mainstream economics) that they accuse mainstreamers of lacking? Couldn’t this be beneficial to both parties?

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I completely agree that the post-autistic economists don’t have much to offer. Given that I live and study in France, I know this mouvement very well, but I know that the “too often uninformed opposition” does not really fit with regard to the quote by Guerrien. He actually wrote books about Game Theory and teaches a course on it at the University of Paris. Thus, it is rather a problem of understanding than lack of information.

By the way, criticism of mainstream economics without understanding it, is a rather wide-spread phenomenon among Austrian Economists as well. Vice versa, Austrian School is rarely understood by the economists who discard it as being useless. Time is a scarce factor which doesn’t allow us to understand every single field of economics and that’s why criticism is often based on superficial analyses of the different economic approaches.

Drilling deeper within a discipline without attempting to connect with other disciplines might eventually led to diminishing returns.

IMHO One might hope for **inter-disciplinary feedback loops between theory, criticism, and practice**, because that’s where the really large knowledge gaps exist, e.g. lack of historians sufficiently familiar with how econ-like rational actor math models (e.g. Jon Elster’s) to see how this might affect historical interpretation, or maybe less so, economists not familiar with economic history and “political economy” (e.g. blatant archival evidence of Nixon trying to manufacture a political business cycle, whether or not he was actually able to do so which could be proved with econ stats). For sure, in certain narrowly proscribed areas within a discipline like finance, for example, this feedback loop between theory, criticism, and practice already exists, take the interplay between efficient markets theory and behavioural finance.